DALLAS – Chad Hopponen got a pleasant surprise as he started preparing a move from California to North Texas.
“It was sticker shock in reverse,” said the commercial property inspector, who was scheduled to move to Denton County in November. “What we would be able to afford was just insane to us. We could double our living space.”
Not so for Stacey Mironov. More than two years after relocating from North Texas to South Florida’s scorching real estate market, she has yet to buy a house.
“I’ve watched the prices go up day by day and week by week for the past year,” said the successful Web designer, who last year passed on a 1,500-square-foot home selling for $325,000. It’s now worth $450,000.
Tale of two countries
Their experiences spotlight the blessing and bane of North Texas’ glacially slow rise in home prices.
Missing out on the housing frenzy that’s hit coastal areas and inland hot spots means the region might be less vulnerable to a real estate crash. Low home prices have also increased the area’s appeal as an affordable major metropolitan area.
But the national gulf in house prices also makes it increasingly hard for local residents to seek opportunities elsewhere, in an era that requires many workers to be flexible in pursuing job opportunities around the country.
More and more, the U.S. real estate market has become a tale of two countries.
In California, Florida and the Northeast, skyrocketing home prices have turned middle-class homeowners into millionaires and stoked a housing boom that skeptics say is a dangerous financial bubble waiting to burst. Prices have also ballooned in landlocked cities such as Las Vegas and Phoenix.
There are growing signs that soaring prices in boom areas are slowing down. The time it takes to sell a house is rising in many markets. The nation’s largest builder of expensive homes, Toll Brothers, recently said that growth in home prices had slowed sharply.
Moreover, interest rates have been increasing, a trend that is expected to continue. That makes mortgage loans and other borrowing more expensive.
“We are looking at about a 4 percent drop in homes sales next year,” David Learah, chief economist with the National Association of Realtors, said in a recent speech to real estate agents. “We are projecting a significant drop in the price appreciation pace.”
Maybe, other analysts say, but a dangerous housing bubble is still stalking parts of the United States, with buyers frantically bidding up home prices beyond their underlying value.
Prices rising, rising
Median home-price growth has far outstripped median incomes. The cost of buying a home far surpasses the cost of renting in some markets, upsetting a traditional rough balance between the two.
“The housing market is definitely overstretched at this point in time,” said Sheryl King, senior economist at Merrill Lynch & Co. “People are looking at prices yesterday and prices today, and they’re drawing a straight line into prices tomorrow. You can’t draw that conclusion. If anything, we have seen some signs that things are starting to slow.”
Potentially, a bursting bubble could derail the economy much as the deflating tech bubble led to a recession and widespread job losses earlier this decade.
Stagnant or falling real estate prices could spook homeowners into cutting consumer spending, the economy’s lifeblood. Consumer spending suffered in the United Kingdom and Australia after house prices there lost just a little steam, King said.
Hot markets
But the housing boom is largely limited to key hot markets, as Mironov found.
After 11 years in the Dallas area, she moved in 2003 to South Florida’s Delray Beach to be closer to her parents and brother. She also landed an attractive job at a marketing communications firm.
But Mironov, 45, also found herself in a red-hot real estate market.
People wait in line for hours for a chance to bid on new condominiums, and huge complexes have sold out in less than a day. House prices in the nearby Fort Lauderdale area have risen more than 115 percent over the last five years. It’s not uncommon for home sellers to receive multiple cash offers above their asking price.
“The houses that I looked at last year but didn’t buy because I wanted to find something perfect would be perfect today because of the way they’ve appreciated,” she said.
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